Chinese telecom equipment maker ZTE is slashing about 3,000 jobs, including a fifth of positions in its struggling handset business in China.
The company is already facing US trade sanctions that could severely disrupt its supply chain and is getting rid of about five percent of its 60,000 stron global workforce.
Its global handset operations will shed 600 jobs, or 10 percent of the total, with the cuts concentrated in China. Things have not been going very well in China and the outfit is losing market share.
A local manager in one of the company’s overseas branches said a 10 percent quota was given to shed staff in his department by the end of January.
The US Commerce Department first announced in March that it would impose a ban on exports by US companies to ZTE for allegedly breaking Washington’s sanctions on sales to Iran.
While this has not happened yet it could nobble the company’s supply chain because it relies on US companies including Qualcomm, Microsoft and Intel for about a third of its components.
The US government appears to be allowing ZTE a further extension to its export freedom until the end of November.
In March, the US Commerce Department hit the company with some of the toughest-ever US export restrictions for allegedly breaking sanctions against Iran. The agency offered the company a three-month relief from the restrictions, which was later extended to Augugst 30.
The plan by ZTE involved setting up several shell companies “to illicitly re-export controlled items to Iran in violation of U.S. export control laws,” according to a U.S. Commerce Department notice to be published Tuesday.
The restrictions were so severe that they not only would prevent ZTE entering the US, they would also cause extreme difficulty when it comes to using compontents made by US companies.
In a report to the Hong Kong stockmarket, ZTE said it would continue to cooperate with relevant US government departments to reach a final solution on the matter. It is not clear how much choice it has.
Chinese phone maker ZTE has not been banned from the US market yet and has been given more time to co-operate with the authorities.
The US government has extended a reprieve to ZTE on tough export restrictions imposed on the Chinese smartphone maker in March for allegedly breaking sanctions against Iran.
The reprieve is until the end of August, the Commerce Department said on Monday.
The renewed Commerce Department license allows ZTE to continue exporting equipment containing US technology. The agency said in March that its first reprieve could be extended if the company cooperated with the government.
Experts had said US export restrictions were some of the toughest ever applied and would have caused disruption across ZTE’s sprawling global supply chain.
The restrictions would have banned US companies from exporting any technology to ZTE, software or equipment such as chips and processors made in the United States. The decision would also have prevented software makers from selling typical office applications like Microsoft Windows or providing updates.
But soon after imposing the restrictions in March, the agency offered the company a three-month relief from the restrictions, which was set to expire June 30. The Commerce Department announced the extension in a notice posted Monday.
In an emailed statement, ZTE Chairman Zhao Xianming said the extension shows that the company is improving its compliance and cooperating with the government’s investigation. The reprieve will allow ZTE to maintain its “relationships with hundreds of American companies and our continued investment in the U.S,” he said.
The US government has temporarily lifted export curbs it imposed on ZTE for alleged Iran sanctions violations.
ZTE has been “in active, constructive discussions” with the Commerce Department for the past week attempting to resolve the matter.
Apparently the outfit made binding commitments to the US government and Commerce expects this week to be able to provide temporary relief from some licensing requirements.
“The relief would be temporary in nature and would be maintained only if ZTE is abiding by its commitments to the U.S. Government,” the official added.
The details of the commitments are expected to be published this week in the US Federal Register.
ZTE promised to ensure all of its operational activities adhere to international standards of its host countries and it will continue to communicate with relevant parties to resolve the issue as soon as possible.
ZTE is the No. 4 smartphone vendor in the United States, with a seven percent market share, behind Apple, Samsung and LG. It sells handset devices to three of the four largest U.S. mobile carriers.
The export restrictions have drawn protests from the Chinese government and really stuffed up ZTE’s business.
ZTE is to appeal a US import ban on its products after an attempt at lobbying US politicians failed.
The US Commerce Department imposed restrictions on US suppliers providing crucial components to ZTE for alleged Iran sanctions violations, a move likely to disrupt its global supply chain.
A US Commerce Department official said he and ZTE Corp are in ongoing discussions,. These discussions have been constructive, and they will continue to seek a resolution.
In statements following the imposition of the restrictions, ZTE said it was “actively facilitating communications with the U.S. governmental department to search for a solution.”
Since coming under fire in 2012 for alleged deals with sanctions-hit Iran and possible links to the Chinese government and military, ZTE has ramped up its spending on Washington lobbyists.
It spent $5.1 million in the last four years, up from $212,000 in 2011, as it sought to assuage national security concerns, according to publicly available lobbying records maintained by Congress.
ZTE lobbyists contacted lawmakers in both houses of Congress, the Department of Homeland Security, the Department of Commerce, the State Department and the National Security Agency to discuss matters such as cyber security, supply chains and trade relations, according to the lobby documents.
ZTE used at least five lobbying firms, and former US officials such as ex-Nebraska congressman Jon Lynn Christensen.
Christensen met with US Department of Treasury, Department of Commerce and lawmakers to provide “education regarding supply-chain security” and “cyber security issues,” the lobby disclosure documents show.
It seems that the efforts failed to convince lawmakers mostly because they are a “Communist Chinese company” who does what every their government says. Rather than being a capitalist company which tells the government how to behave.
It seems that the US’s daft ban on ZTE gear is doing more harm to its home-grown businesses which are suffering more.
The U.S. Commerce Department decided to punish ZTE for selling coms gear to the Iranians years ago and issued an export ban on the outfit. However that seems to be punishing a lot of US companies who depend on ZTE’s components or business.
Jose optical-parts maker Oclaro saw its shares plummet because it sells multiple products to ZTE, a maker of mobile devices and telecoms systems.
Chipmaker Integrated Device Technology said the Commerce Department’s ruling “could cause changes to revenue trends” in its quarter ending July 3 its shares fell 1 percent.
Among other suppliers whose shares fell were Lumentum, down 3.3 percent; NeoPhotonics Corp, down 8.6 percent; Fabrinet, down 5.3 percent; Finisar Corp, down 7.7 percent; Inphi Corp, down 7.3 percent; and Skyworks Solutions Inc, down 4.1 percent.
ZTE distributor Avenet fell 1.5 percent.
Qualcomm slid 1.58 percent while its rival MediaTek Inc rose three percent. Any switch by ZTE to replace Qualcomm as a supplier might take several months, because of the need to work out need specifications.
However the worse it yet to come. The worst fallout for US suppliers around ZTE’s telecommunications-infrastructure equipment rather than its handset business.
Still while the US tech industry suffers, at least they can be re-assured that by stuffing themselves up they will be punishing that naughty Chinese telco for breaking a US embargo when the Americans hated the Chinese.
Chinese Telco ZTE is too scared to send its executives to the US because it is terrified that they will be sentenced in one of its kangaroo courts that only lets off rich Americans and celebrities and locks up the rest for thousands of years.
US coppers have been looking into allegations that China’s ZTE sold banned US computer products to Iran and ZTE has refused to make one of its top executives available for questioning over fears he will be arrested.
On Tuesday, US District Judge Lewis Kaplan in Manhattan rejected ZTE’s request that he show “mercy” and reconsider his order compelling the company’s general counsel, Guo Xiaoming, to appear in New York for a deposition in a breach of contract lawsuit with Vringo.
In 2012 the US Department of Commerce and the FBI launched investigations into possible unauthorised exports to Iran, in violation of US sanctions.
The civil and criminal probes followed reports that ZTE in 2010 had a $120 million contract with Iran’s largest telecom firm, including supplying US computer equipment. ZTE could face steep fines and restrictions on its US operations.
Vringo’s chief legal and intellectual property officer David Cohen said the ruling highlights “ZTE’s lack of respect for intellectual property and the rule of law”,
However he would say that – Vringo and ZTE are suing each other in Kaplan’s court for breaching agreements related to licensing patents on mobile phone technology.
Last week, ZTE told Kaplan that Guo was unwilling to travel to the US due to the export control investigations. A lawyer for ZTE said she believed Guo would be questioned or detained.
Kaplan denied the request yesterday, saying there was no evidence of an outstanding arrest warrant for Guo personally. Even if there were, he said, the court should not be put in the position of helping a witness avoid charges of violations of US law.
Kaplan added that ZTE had previously given different reasons to prevent Guo’s appearance and he thought ZTE was stalling and game playing.
Chinese phone manufacturer ZTE said it has signed a memorandum of understand with Japanese giant Softbank for joint research and development on 5G networks.
ZTE has technology called Pre5G which includes multiple input, multiple outlet (MIMO) technology. The two companies have already worked together including ultra dense networks and multi user shared access.
ZTE said MIMO base stations are able to support over 100 antenna elements and give higher space division multiplexing gains than traditional eight antenna base stations.
Softbank believes this technology will define standards for future mobile internet communications.
ZTE said that it already has formed alliances with other partners around the world on 5G research and wants to build a system based on open collaboration.
Softbank already has ambitions to dominate a future 5G network and said it will be the industry leader worldwide.
IBM has added an open access cloud service to the OpenPOWER alliance.
The alliance includes Nvidia, Mellanox, Google, Tyan and dozens of other vendors.
Big Blue said it has added SuperVessel to the global community of developers who have bought into the OpenPOWER alliance.
SuperVessel is based on IBM’s proprietary POWER processors and the cloud consists of those along with FPGAs and graphics processors to give faster service. OpenStack is used to manage the whole cloud.
SuperVessel consists of online virtual laboratories where developers can access open source software and build and test applications. The “labs” include Big Data, the Internet of Things, and virtualisation on POWER processors.
Xilinx is providing the PGA accelerators for the SuperVessel cloud service in a bid to make computing faster.
Other of the 113 members of the OpenPOWER alliance include Samsung, Wistron, ZTE, Hitachi and Altera – shortly to be acquired by the Intel Corporation.
ZTE has said that sales of 4G smartphones accounting for at least 40 percent of its global smartphone shipments in 2014.
According to Reuters, the Chinese based ZTE plans to ship 60 million smartphones in 2014, up 20 million units from last year.
ZTE global head of mobile devices Zeng Xuezhong told a press conference in Hong Kong that the company’s smartphone business was strong in the USA, Japan and Europe. But this year we will add China to that list.
ZTE returned to net profit last year after making a loss in 2012. However operating revenue for the year dropped 10.6 percent, its biggest decline on record, to hit the lowest level in three years.
The company is lagging behind Huawei and Lenovo Group Ltd, which are respectively the number three and five in the world by smartphone shipments.
IDC claimed that Huawei shipped 48.8 million smartphones last year and Lenovo, which acquired the Motorola Mobility handset unit from Google in January, shipped 45.5 million units.
However, as telecoms equipment makers, ZTE and Huawei are set to reap the rewards of contracts to build high-speed 4G mobile networks around the world. ZTE predicts global spending on 4G will be $100 billion in 2014.
ZTE, Huawei and Lenovo need China for the vast majority of their smartphone sales. Huawei and ZTE are set to doubly benefit from China’s 4G rollout as they make money from building the networks as well as handsets.